China Shares Hit By Rate Report, Asia Mixed

ShriNavaratnam

SINGAPORE -- Asian stock markets were mixed on Tuesday as mild Wall Street losses on Monday crimped demand, while the Shanghai market was down on a media report that the Chinese central bank may hike rates around the weekend.

Dow Jones Industrial Average futures were up 18 points in screen trade.

Shares in China were lower after a report in the state-run China Securities Journal said that the People's Bank of China may hike interest rates around this weekend, before the release of inflation data for November on Monday. The front-page report, which cited analysts, also said the upcoming Central Economic Work Conference increases the chance of a rate hike soon.

While the report may not reflect official views in Beijing, traders note that China has a history of announcing tightening measures off-market hours. China announced an interest rate hike, the first in nearly two years, on the evening of Oct. 19, two days before the release of the inflation data for September.

"The recent rise in (China) property prices has also deepened concerns that Beijing will launch more tightening measures in the near future," said Zhang Xiang at Guodu Securities.

Agile Property was down 1.4% and Hopson Development was off 1.2%.

The Tokyo market was weighed by a firmer yen. Exporters' stocks came under some selling pressure with Honda Motor off 1.8%, Canon down 0.9% and Sony 0.8% lower.

"There was a widespread view for a shift towards the weaker yen, but that storyline collapsed following the (weak) U.S. jobs data," said Yutaka Yoshii, general manager at Mito Securities.

Advantest bucked the market, rising 5.2% after the chip equipment maker said on Tuesday it has made a buyout proposal to a U.S. semiconductor-testing company Verigy worth nearly $730 million.

Tire-maker Bridgestone gained 0.7% after it said it decided to raise prices of truck and bus tires in Japan by an average of 7.0% from next March due to a rise in rubber and petrochemical prices.

"The biggest factor is a recovery in U.S. auto sales," which is promoting some buying in carmakers and other related shares like tiremakers, said Yoshihiro Okumura, general manager at Chibagin Asset Management.

The Australian market extended morning gains with the benchmark S&P/ASX 200 index rising to a three-week high of 4727.2 after the country's central bank held rates steady at 4.75% and adopted a benign stance on policy.

The Reserve Bank of Australia said that "over the next few quarters, inflation is expected to be little changed," reinforcing the view that a rate hike will be some way off. Josh Williamson, economist at Citigroup, said the RBA statement "suggests they won't do anything (for a while) based on the outlook that they've seen." The RBA led other central banks in tightening monetary policy, raising the cash rate target seven times since October 2009.

Gains in resources stocks underpinned the market, with BHP Billiton up 1.5%, Rio Tinto adding 1.8% and Newcrest Mining advancing 1.4%. Banking stocks also rose, with National Australia Bank up 1.5% and ANZ Bank up 1.2%.

In Seoul, the market rose on gains in steel and shipbuilding stocks which recouped some of their recent losses.

Tech plays were mixed with Samsung Electronics up 3.0%, but Hynix Semiconductor was down 2.3% on worries that a sharp decline in DRAM chip prices might affect its earnings.

Elsewhere in the region, Taiwan's Taiex was down 0.1%, Singapore's Straits Times Index fell 0.1%, Philippine shares slid 0.6%, shares in Thailand were up 0.8% and New Zealand's NZX-50 was down 0.3%.

In foreign exchange markets, the euro continued to struggle as investors remained focused on Europe's debt crisis as a meeting of euro-zone finance ministers continued in Brussels.

The market is now looking to Ireland's budget which is expected to pass a critical vote later in the day.

Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow, said although indications were the budget will be passed, "investors want to wait to see how the vote actually turns out" before making major bets on the euro.

Some of the risk-sensitive currencies like the euro and Australian dollar also came under mild selling in early Asian trade after the China hike report. The Australian dollar gave up some ground after the RBA statement signaled that policy rates will be on hold for sometime.

The Australian currency was fetching US$0.9901 against the U.S. dollar, from US$0.9910 before the RBA statement.

The single currency was fetching $1.3341 against the dollar, from $1.3321 late in New York on Monday, and at Y110.05 against the yen, from Y110.08. The dollar was buying Y82.48, compared with Y82.62.

December Japanese government bond futures were down 0.02 at 141.46 points, on profit-taking, while the 10-year cash bond yield was up one basis point at 1.165%.

Spot gold was recently at $1,421.70 per troy ounce, down $2.00 from its New York close on Monday. January Nymex crude oil futures, which rose to a 26-month high on Monday, were down 17 cents at $89.20 per barrel on Globex.

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